Abuc Trading & Sales Corp. v. Jennings

Offutt, J., delivered the opinion of the Court. James L. Bernard, who appears to have been at that time engaged in the business of scrapping or dismantling obsolete and disused ships, in the latter part of 1924 interested Louis Starr and John J. Lyons in the purchase of a ship, the Morganza, then lying in the James River. Later, he with Lyons and Starr, went to the offices of Ben Barber, Esq., an attorney with offices in New York City, and informed him that he had purchased a ship for the purpose of scrapping it, and that they needed a corporation to carry on a business of that character. Barber told them that he “had a corporation in the office” which could be organized ³⁹⁵ immediately, and they instructed him to organize it.

Thereupon the Abuc Trading and Sales Corporation, a corporation of the State of New York, which had been incorporated in 1923, was “pressed into service” for the venture. Eiftyone per cent, of the stock was issued to Starr, who was to supply the money for the venture, and forty-nine per cent, to John J. Lyons, who agreed to divide fifty per cent, of his stock with Bernard. Upon the organization of the company, William J. Lyons, a brother of John J. Lyons, was elected president, E. G. Graeber, vice-president and treasurer, and Frank Y. Donegan, connected with Barber’s office, secretary, and they appear to have also composed its board of directors. At the first meeting of the directors it was resolved that the funds of the corporation should be deposited in the National Bank of Baltimore, subject to checks made in the corporate name and signed by the treasurer, that its principal office should be in the Times Building, New York City, and that “Mr. James L. Bernard be and he is hereby appointed superintendent of the Sparrows Point plant of the Bethlehem Shipbuilding Corporation or such other plant that the corporation might procure for the purpose of scrapping vessels, at the salary of $75.00 per week, payable wnekly, and that said salary shall be paid at that rate from the 24th day of October, 1924.” It was further resolved: “That the president or vice-president be and he hereby is authorized to enter into any agreement which he in his judgment deems to be fair and reasonable with the Bethlehem Shipbuilding Corporation covering a lease of the Sparrows Point plant of that corporation for the purpose of scrapping ships; and * * * That he be and hereby is authorized to enter into contracts for the purchase of ships and other materials for scrapping, and tools and other equipment to carry out said scrapping operations and all other contracts necessary to carry on said business.” ³⁹⁶ Bernard then bought the Morganza for the company, and leased plant equipment at Sparrows Point, Maryland, from the Bethlehem Steel Company, for wrecking it.

Subsequently on' behalf of the company he negotiated the purchase of four other ships, described as “destroyers,” lying at New London, Connecticut, for $33,000, had them towed to Sparrows Point, and leased additional space for wrecking or scrapping them. The four “destroyers” were steel ships, but in their construction, in addition to ferrous metals such as iron and steel, it was thought that a quantity of nonferrous metals, such as lead, copper, brass, and other metals in which copper appeared as a basic element, were used. In December, 1924, Bernard, representing himself to be the agent of the appellant, made a written contract with William Henry Jennings, sales manager of the American Steel & Wire Company, which reads as follows: “Baltimore, Md., December 24th, 1924. “The agreement hereinafter stipulated has this date been made between James L. Bernard, vice-president and general manager of the Abuc Trading Company of Hew York, party of the first part; and Wm. H. Jennings of Baltimore, Md., party of the second part; and witnesseth: “That the party of the first part is occupied in wrecking for scrap metals, four ships known as “destroyers,” recently bought and now placed for wrecking at the ship building plant of the Bethlehem Steel Company, at Sparrows Point, Md., and that the said party of the first part is desirous of finding purchasers for the non-ferrous metals obtained in the scrapping of said vessels. “It is therefore agreed by the parties herein mentioned, that the party of the first part will pay to the party of the second part, a commission of one-half cent per pound, on the entire tonnage of scrap lead and scrap copper recovered from said vessels, in consideration of the fulfillment of agreement by the party of the second part of introducing party of the first part to responsible buyers financially who will buy this ³⁹⁷ entire tonnage of lead and copper scrap from the party of the first part, as fast as such metal scrap is recovered from said vessels and ready for delivery to such buyers.

All such above purchases to be made at prices satisfactory to said party of tbe first part. “It is further agreed that such commissions due to the party of the second part shall he paid from time to time, immediately after party of the first part has received full payment for each and every shipment to such buyers. “Signed by party of the first part— “James L. Bernard. “Signed by party of the second part — ■ “Wm. H. Jennings.” Thereafter Jennings introduced to Bernard a purchaser/ which bought and paid for from the appellant 430,939 pounds of non-ferrous metal taken from the four destroyers. Jennings thereupon demanded that the appellant pay him his commission of one-half cent per pound on the material so sold, and upon its refusal to make such payment, he instituted attachment proceedings on original process as against a non-resident against it. The attachment was laid upon three of the destroyers and a quantity of brass scrap. .

The defendant appeared in the short note case, filed the general issue pleas therein, filed a bond, dissolved the attachment,, and the case then proceeded to trial on the short note case. That trial resulted in a verdict a'nd judgment for the plaintiff, and from that judgment this appeal has been taken. At tbe conclusion of the whole ease the plaintiff offered! three prayers, of which the court granted one, amended and! granted one, and refused the other, and the defendant offered! seven, of which two were granted and the others refused. These rulings are the subject of the second exception, and they all rest upon one or more of these propositions, (1) that the contract, which is the basis of this suit, was the contract of the Abuc Trading and Sales Corporation, (2) that James L. Bernard was duly authorized as the agent of the appellant to execute that contract, (3) that the term “scrap ³⁹⁸ copper” used iu the contract, was equivalent to and meant the same thing as “non-ferrous” metals, and (4) that the plaintiff was entitled to commissions, not only upon metal taken from the four destroyers actually sold to the purchaser introduced by him, but also upon all such metal which the appellant agreed to sell to that purchsaer, but which was not in fact actually sold to it.

Before dealing with the legal principles involved in these propositions, we will refer to the evidence relating to them, and since the defendant’s first and fifth prayers challenge the legal sufficiency of that evidence, we will, under the established rule, for the purposes of those prayers, assume the truth of all facts shown by it, together with all inferences which may properly and naturally be drawn therefrom, which tend to support the plaintiff’s claim. Thus dealt with, the evidence establishes these facts: The Abuc Trading & Sales Corporation is, as we have stated, a corporation of the State of New York, organized apparently for the sole purpose of buying obsolete and disused ships, scrapping them, and selling the “scrap” metal contained in them. Its “principal office” was, by a resolution of its board of directors, located in the Times Building at 42nd Street and Broadway in New York City, but it also had an office on the property of the Bethlehem Shipbuilding Company at Sparrows Point, where some of its mail was ■received, where some of its books were kept, and where Mr. E. G. Graeber, its vice-president and treasurer, who kept its books, appears to have had his headquarters. William J. Lyons, president of the corporation, and Frank V. Donegan, its secretary, although duly elected by the board of directors, had actually nothing at all to do with the business or management of the company^ but it was carried on by E. G. Graeber, under the direction of John J. Lyons and Louis Starr, who, together owned all of its stock, but held no office in it.

Graeber himself, offered as a witness for the'appellant, testified that he “had full authority in talcing charge of the Abuc Company from start to finish,” and later said that he controlled the board of directors, and that he in fact was the ³⁹⁹ board of directors. Bernard was not a stockholder of record, although John J. Lyons had agreed to divide his stock with him, nor was he an officer, but he had been appointed “superintendent” of the company’s plant at Sparrows Point, and appears to have been the only person connected with the management of the corporation who had had previous practical experience in the business in which it was engaged. He negotiated contracts for the purchase of the “Morganza” and the four “destroyers,” for leasing space for docking and wrecking them. With the consent and knowledge of Graeber he made and signed contracts in the name of the company for the sale of the scrap steel and other ferrous metals taken from the “destroyers,” he also with the knowledge and consent of Graeber executed in the name of the company the contract under which it leased space from the Bethlehem Shipbuilding Company, he made contracts for towing the ships to Sparrows Point, employed and paid the men employed in wrecking them, and purchased or leased the machinery and appliances used in that work, and he sold most of the scrap taken from the destroyers, as “that was one of his duties.” Early in the fall of 1924, Bernard approached William IL Jennings, who was sales manager of the American Steel and Wire Company, who was familiar with the metal trade and, knew many persons engaged in it, and asked him to introduce-him, Bernard, to the “Bethlehem people,” which he did..

Later, in the early part of December, Bernard again came-to him, and told him that he knew of an opportunity to purchase four “destroyers” and added: “This is big game, these-boats are solid metal, copper and steel, etc. I can’t handle-them the way I have been handling this boat at Norfolk and I will have to make arrangements with very large concerns to take this stuff. * "x‘ * you know these big people around the city and if you can make a date to introduce me to some one who will buy all the non-ferrous metal off these destroyers what I can handle off them, because I know Leury Brothers, who as I knew were the very largest steel scrap people in tho country, I mean handling the steel through the Bethlehem ⁴⁰⁰ Steel Company, but I don’t know anybody who will buy this non-ferrous metal in large quantities.” Jennings did not then know of any one who would purchase the scrap, but first offered it to his own company, and when it was unable to take it, he finally interested Mr. Leon Falk, Sr., of the Federated Metals Corporation of Pittsburgh, in it, and arranged a meeting between Falk and Bernard. As a-result ■of that meeting, the Federated Metals Company contracted with the appellee to purchase certain quantities of the nonferrous metals from the four destroyers, and under that contract 430,939 pounds of such metal were actually sold, delivered, and paid for. Prior to the meeting between Falk and Bernard, Bernard had orally agreed with Jennings to pay him one-half cent a pound commission on sales of “copper scrap” to purchasers introduced by him, and on the day when Falk met Bernard in Baltimore, that agreement was put in writing, and signed by Jennings and Bernard. The contract for the sale of the non-ferrous metal in the four destroyers was formally executed by the Federated Metals Company, and the appellant, through James L. Bernard, on December 30th, 1924.

Bernard, testifying for the appellee, when asked whether Graeber knew of these contracts with Jennings and the Federated Metals Company, gave this testimony: “How did they get on file in the office? I took them there. Which office? Sparrows Point office.

When? The day after they were ¡signed. That would be December 31st, 1924? Yes, and the next day just before New Year’s; it was signed that night, T don’t know whether I took them down that night or the day ¡afterwards; I took them down and put them on file..* * * Where did you put them ?

I don’t know; we didn’t have very -much space to put anything, we only had a little desk about that big (indicating) and letter file and stand and most everything went on that desk. Any officer of the company there at that time? Mr. Graeber. Did he see these two agreements ?

Yes. The agreement with the Federated Metals and the agreement with Mr. Jennings? Yes. That was either December 31st, 1924, or January 1st, 1925.

Within a ⁴⁰¹ day or so of signing of that contract. How do you know that Mr. Graeber saw those two contracts ? Well, he was in charge of the office, and he filed all the papers away, and they were there on the desk, and I had discussed the contract with him the day after Mr. Ealk and Mr. Simon were down there. Why are you positive he knew anything at all about the Jennings contract?

Well, it was the day after they were there, the day I brought the contract back, within a short period of time after I had the contract signed, I think the next day; I told him we made a good contract with the Federated Metals and he said, ‘Yes,’ and I said, ‘We got more than the market,’ and T said, ‘Including Jennings’ commissions that nets us so much money.’ He said, ‘Yes,’ and I think a man named Patten was there at the time and discussed it at lunch time, that the contract was made, and said, ‘I understand they are very big people and have a good reputation,’ and after the shipment was made I gave an office memorandum to him to pay Mr. Jennings his commissions.” The first shipment of non-ferrous to the Federated Metals Company under this contract- appears to have been made on or about January 16th, 1925, and on February 6th Bernard gave to Jennings a memorandum which indicated that there was due him, as commissions on the first shipment, $219.52. On the day that a check paying for the first shipment of scrap metal was received from the Federated Metals Company, Bernard gave a memorandum of the amount of commissions due Jennings to Graeber, and instructed him to pay it. Graeber, instead of doing that, called up Louis Starr, who was a stockholder of the corporation, for instructions, and was told by him not to pay it. Shortly after that Jennings inquired of Bernard about his commissions, and Bernard then learned for the first time that Graeber. had not paid them.

He then asked Graeber why they had not been paid, and Graeber told him that he understood the commissions were to be one-quarter of a cent a pound, and also told him that he had consulted Starr, who told him not to pay it. Bernard then had an interview with a “Mr. Lyons,” presumably the stockholder, and not the president of the corpo ⁴⁰² ration, and lie consented to the payment of Jennings’ commissions. Shipments continued to be made to the Federated Metals Company, -but no payment on account of his commissions was made to Jennings, and on March 2, 1925, Bernard sent a memorandum for “Mr. Lyons” to Ben Barber, Esq., the company’s attorney in New York, .stating that 153,090 pounds of metal had been settled for by the Federated Metals Company, that Jennings had “received no payments” and that Graeber would not make any until authorized by Starr, and requesting that such authority be given, so that “payment can be made as agreed.” That memorandum was never delivered by Barber to Lyons, but on February 11th, 1925, the appellant by its treasurer had written to the Federated Metals Company a letter which in part reads as follows: “Our Mr. Bernard has brought to us a question of one-half cent a pound commission to be paid to Mr. W. H. Jennings and it is the desire of the directors of this corporation to ascertain from you whether the said Mr. Jennings is an authorized broker. If this is the case it is the sincere wish of this corporation to so recognize Mr. Jennings and pay him the above commission on all shipments made to your good firm.” The Federated Metals Company, replying to that letter, in part said: “Since all of our discussions and trading on this subject have been with Mr. Bernard, we respectfully refer you to him for information pertaining to our contract.

It is necessary for us, however, to say that if we had not been referred to Mr. Jennings, the likelihood is that we would never have consummated this transaction.” Graeber, in explaining his reference to the “directors of this corporation” in his letter to the Federated Metals Company, said that there had been no meeting of the directors, but that he was the board of directors and when the question of commissions came up to him it came up to the board of directors. After writing the letter of February 11th, 1925, the appellant made six more shipments, the last of which was on April 15th, 1925, to the Federated Metals Company, of non-ferrous metals, which, with the three shipments previously made, aggregated 430,939 pounds. After that date it sold and ⁴⁰³ shipped to the Globe Iron Works the balance of the non-ferrous metals taken from the destroyers, 137,393 pounds, although the Federated Metals Company was ready, able and willing to accept that also under its contract with the appellant. During the course of the trial, a question arose as to what was meant by the term “scrap copper” as used in the contract between the parties to this appeal, and in connection with that issue it was testified by the appellee, who had had a lifetime experience in dealing with copper and brass, that “the classification for all of these alloyed or compounded metals which depend upon copper for their base is in the trade known as copper, as there can be, of course, solid copper without any brass or other compound, while there can never be brass or bronze, for instance, without a great percentage of copper, so that, in classifying the metals on these boats, the expression copper metals was, from habit in the trade and with full understanding of both parties, intended to cover all the metals which contained any percentage of copper, without designating any particular metals as showing certain percentage of the copper base.” To the same effect was the testimony of Bernard who, in speaking of certain valves made of an alloy on a copper base, said: “You mean if you are talking about these valves, you would talk about them as copper valves?

A. According to the composition that is in them; in the terms of the seller they are brass, and in the terms of the manufacturer, they are copper. * * *” “Q. What do you mean, what distinguishes these valves. You mean in the terms of the manufacturer they are copper, but in the terms of the dealer they are brass. What do you mean? A. That is the way they are. * * * You tell the court that was copper and not brass?

A. I am trying to hold down the basic metal. Q. You have told us the basic metal was copper? A. Yes. Q. Then, if you go by the basic metal, it is all copper?

A. It is all copper, it is basic metal.” These facts have been, for brevity, stated in narrative form, for although many of them are flatly contradicted by ⁴⁰⁴ the appellant, nevertheless, in considering its first and fifth prayers, the evidence tending to support them must be accepted as true. Turning now to a consideration of those two prayers, we find that the first prayer of the appellant is a demurrer to the evidence in common form, while its fifth prayer in effect asserts that there is no evidence in the case legally sufficient to warrant the inference that, in executing the contract with Jennings, Bernard acted as the agent of the appellant, or that the appellant, with full knowledge of all facts material and relevant to the transaction, ratified his act. Mechem on Agency, pars. 393-396; Martin v. Lanahan & Co., 133 Md. 531 . The first question presented by these two prayers is whether there is to be found in the record any evidence legally sufficient to support the hypothesis that the contract sued on is in fact the contract of the appellant.

The language of the contract itself, considered apart from its subject matter, while not wholly free from ambiguity, yet is so clear that, if we are not at liberty to go beyond its text to ascertain its meaning, it would be difficult indeed to hold that it is the contract of the appellant. It states that it is between “James L. Bernard, vice president and general manager of the Abuc Trading Company of New York as party of the first part,” and William H. Jennings, and it is signed by “party of the first part — James L. Bernard” and by Jennings. That is, in so many words, it does not purport to be the act of the “Abuc Trading and Sales Corporation” but the act of James L. Bernard, who described himself as the vice president and general manager of the “Abuc Trading Company of New York,” and it was not signed by Bernard on behalf of any corporation, but by him as “party of the first part,” who is described in the contract as “James L. Bernard, vice president and general manager of the Abuc Trading Company of New York.” But if it is so construed, the contract is utterly meaningless and ineffective, because Bernard as an individual had no interest in the four destroyers, and there was no such corporation as the “Abuc Trading Company of New York.” On the ⁴⁰⁵ other hand, there was a corporation having the name of the “Abuc Trading and Sales Corporation,” which was of New York, which did own the four destroyers referred to in the contract, and while Bernard was not the vice president of that corporation, he was its general superintendent, and had been permitted by and with its consent to execute contracts in its name, and Mr. Graeber who, according’ to his own testimony, was not only the vice president and treasurer of the corporation, but also functioned as its board of directors, knew that Bernard represented himself as its general manager and vice president, and when asked whether Bernard had not signed contracts for the company, he gave this testimony: “Signed by you? A. No. Q. Signed by Bernard?

A. Yes. I let him sign them. He had a peculiar hobby about signing the papers, so he wanted to retain his prestige as a scrap steel man. Q. That prestige would be retained by signing as vice-president and general manager?

A. Yes, I think he felt that way about it. Q. It tvas an unusual thing? A. Not necessarily. Q. You let him go ahead, you didn’t make any objection, you didn’t care whether he signed?

A. Oh, yes, I knew every contract he signed and I had copies of the contracts at the time they were signed.” And where, as is the case here, the text of the written contract, considered in connection with its subject matter, leaves it in doubt whether it was intended to bind the principal or the agent, we are not limited to the letter of the instrument, but may also consider the situation of the parties, the circumstances under which it was made, and such other extrinsic matters as will directly reflect upon the intention of the parties. A contract can not well be considered apart from the subject matter upon which it operates. Mechem on Agency (2nd